TITLE:CONCERNING THE IMPOSITION OF CONDITIONS UPON THE OPENING OF THE
RETAIL ELECTRICITY MARKET TO COMPETITION.

Summary of Legislation

The provisions of this bill would require that, if competition in retail electricity supply
should result from the adoption of a bill deregulating electricity supply, it should occur only after
there are certain policies, programs, and procedures in place, including those that will protect
consumers and the environment, foster fuel diversity, protect Colorado’s workforce, and avoid
reduction in revenues to local governments. The bill also would require that each Colorado utility
for which retail electricity competition is implemented establish a non-bypassable public benefits
charge to collect revenues to be used to pay low income energy assistance, emergency energy
intervention, and home weatherization; the development and commercialization of Colorado
renewable energy resources; and the improvement of electric energy efficiency generally. The
moneys collected would be used to provide products and services not provided by competitive
markets and to reimburse utilities, PUC, and local governments for specified expenditures. The bill
would become effective upon signature of the Governor and would take effect concurrently with the
first law of this state authorizing competition in retail electric supply. The fiscal impact of this bill
is conditional on the General Assembly adopting legislation to deregulate the retail electrical market.

STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund

Fixed Utility Cash Fund

$103,541

$88,257

State Expenditures

General Fund

Fixed Utility Cash Fund

Department of Law - Cash Fund Exempt*

$129,663

92,835

24,000

$73,109

79,335

19,200

FTE Position Change

2.4

2.3

Local Government Impact — Potential revenues and expenditures to local governments.

*The cash fund exempt expenditures of the Department of Law would be out of the expenditures of the Fixed
Utility Cash Fund as indicated above.

State Revenues

Fixed Utilities assessments are made annually based on the appropriation to the PUC for
work related to fixed utilities. The FY 1998/99 and FY 1999/2000 assessments would be increased
to cover the increased costs of both the PUC and the OCC. Revenues to the Fixed Utilities Cash
Fund would increase by $103,541 in FY 1998/99 and $88,257 in FY 1999/2000, an amount
sufficient to cover the costs of the bill as well as those costs not included in this fiscal note pursuant
to the Joint Budget Committee’s budget policies.

It is assumed that the non-bypassable public benefits charge would not be considered
revenues to the state. They would be collected and retained by the utilities themselves.

TABOR Refund Impact

Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage
increase in state fiscal year spending. Once total state revenue from all sources that are not
specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state
constitution requires that the excess shall be refunded in the next fiscal year unless voters approve
a revenue change as an offset. Based on the current Legislative Council economic forecast, it is
projected that the state will be in a TABOR refund position during each of the next five fiscal years.
Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue
sources will affect the amount of the state revenue to be refunded.

State Expenditures

The following provisions of the bill would have an impact on the expenditures of the PUC,
the OCC, and the Department of Law. It is assumed that the resources to implement numerous
provisions of this bill would be contained in the requisite bill deregulating electricity supply
(on which this bill is conditioned) and that those costs are not duplicated in this fiscal note.
Among others, these provisions include consumer protection, recovery of stranded costs, and
functional separation. This bill would require the PUC to be responsible for adopting rules and
regulations to ensure the following:

•providers collect a “non-bypassable” public benefits charge of at least 3 percent
of gross annual revenues for the year 1997 to be spent on low-income energy
assistance, emergency energy intervention, and home weatherization; the
development and commercialization of Colorado renewable energy resources; and
the improvement of electric energy efficiency generally. They would also be used to
reimburse PUC and local governing bodies in implementing this section. Providers
are required to submit plans for approval by the PUC for the expenditure of funds for
public benefits. It is estimated that the PUC would require 0.1 FTE Financial
Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop
rules and 0.1 FTE of each in FY 1999/2000 to implement the regulations;

•renewable energy sources minimum targets are met and if they are not met, the
PUC would establish enforceable standards. It is estimated that the PUC would
require 0.1 FTE Financial Analyst III, Economist IV, and Professional Engineer II in
FY 1998/99 to develop rules; and

•PUC’s ability to complete the required investigation of reliability of the electric
system after competition and the impact on market power in the state. The PUC
would require 0.1 FTE Financial Analyst III, Economist IV, and Professional
Engineer II in FY 1998/99 to develop rules and 0.1 FTE for each in FY 1999/2000
to implement the regulations The PUC would require additional 500 hours of legal
services in FY 1998/99 and 400 hours in FY 1999/2000 primarily to assist the
commission with proceedings related to the provisions of the bill.

The workload of the OCC, which represents consumers before the PUC, including
residential, small business, and agricultural consumers would increase as the result of the provisions
of the bill. It is estimated that the OCC would require an additional 0.2 FTE Rate Examiner Analyst
V, 0.2 FTE Fate Financial Analyst III, and 0.1 FTE Administrative Assistant II.

The additional costs to the PUC, OCC, and Department of Law are as follows:

ADDITIONAL COSTS TO THE PUC, OCC, AND DEPARTMENT OF LAW

Personal Services: PUC TOTAL FTE - 0.6/0.5 FTE

FY 1998/99

FY 1999/2000

Rate Financial Analyst III - 0.1/0.1 FTE

$5,434

$5,434

Economist IV - 0.3/0.2 FTE

17,115

11,410

Professional Engineer II - 0.2/0.2 FTE

12,577

12,577

Personal Services: OCC TOTAL FTE - 0.5/0.5 FTE

Rate/Financial Analyst V (0.2/0.2 FTE)

13,881

13,881

Rate/Financial Analyst III (0.2/0.2 FTE)

9,622

10,877

Administrative Assistant II (0.1/0.1 FTE)

2,322

2,322

Operating Costs: PUC & OCC

3,434

3,434

Capital Outlay (Including ADP) - PUC & OCC

4,250

Centralized Data Processing PUC & OCC

200

200

Legal Services: (0.3/0.2 FTE) PUC only

24,000

19,200

TOTAL EXPENDITURES - 1.4/1.2 FTE

$92,835

$79,335

In addition to the above expenditures, the following Departments would require additional
resources to implement the provisions of the bill related to consumers and the environment, foster
fuel diversity, protect Colorado’s workforce, and to avoid reduction in revenues to local
governments:

•The Department of Public Health and Environment, Air Pollution Division, would
require $79,663 General Fund and 1.0 FTE in FY 1998/99 and $73,109 and 1.1 FTE
in FY 1999/2000 to administer the air quality standards.

•The Department of Labor and Employment will require additional resources to
prepare a report on the effect of retail electric competition on employment, pensions,
and workforce dislocation. The costs of such a study are not included in this fiscal
note.

•The Treasury would require an estimated $50,000 General Fund to contract for a
study of the impacts on local government revenues.

Expenditures Not Included

Pursuant to the Joint Budget Committee’s budget policies, the following expenditures have
not been included in this fiscal note:

•health and life insurance costs;

•short-term disability costs;

•inflationary cost factors;

•leased space; and

•indirect costs.

Local Government Impact

The bill would authorize local governing bodies to recoup any costs to implement the bill.
The bill would permit any municipality or group of municipalities acting together to aggregate the
retail electric loads of electricity customers with their boundaries. The fiscal impact to local
governments is conditional on their efforts to implement the provisions of the bill and cannot be
accurately estimated.

Spending Authority

The fiscal note implies that the Department of Regulatory Agencies would require additional
cash spending authority of $92,835 (CF) and 1.4 FTE in FY 1998/99. Out of that amount, the
Department of Law would require additional cash spending authority of $24,000 CFE and 0.3 FTE.
In addition, the Department of Public Health and Environment would require additional General
Fund spending authority of $79,663 GF and 1.0 FTE in FY 1998/99. The Treasury also would
require additional General Fund spending authority of $50,000 in FY 1998/99.

Departments Contacted

Regulatory Affairs Public Health and Environment TreasuryLabor and Employment